STANLEY HAS SPOKEN

In a conference hosted by the Central Bank of Chile of all people, Stanley Fisher revealed that in  his opinion it looked as though it was about time for a gradual rise in interest rates.  So much for uncertainty.  The Fed will raise in December and continue to raise until...well, until it catches up with the market.  Oh, the 10 year closed at 2.15% today..  From the standpoint of economic meddling, the Fed is dead and I would bet that the happiest guy in the room is Stanley.

What we are looking at in the near future is exactly what Stan Fisher has been quietly calling for and hoping for:  if there is to be stimulus let it be of the fiscal kind and with it let there be a restructuring of economic governance in taxes, regulation and alike that has been so long needed in this and other western economies.  I don't know what are Mr. Fisher's politics---frankly, I don't know if anyone does--but I suspect he is appreciative of how the markets are responding to Mr. Trump's election and taking the Fed out of a nasty little corner into which they had put themselves.

They are not out of the woods of course.  There is a little matter of $4 Trillion on their balance sheet that they have to work off and there are rather clear signs that inflation is afoot the containment of which is their primary (some think otherwise--some are wrong) mandate through monetary governance.  Spilling their balance sheet into the world is not exactly compatible with controlling inflation but this was always going to happen and one can only hope that there have been a few good folks thinking about this.  And while we are on the subject of thinking, think about the greatest reversal of sentiment we have ever seen.  From stated fears of total destruction of all things in the event of a Trump win we have seen the Masters of the Universe turn on a dime and buy the DOW to an all-time record close in the space of three days.  Who the hell in their right mind would give their money to these guys to manage?

From now the tale will become how much of the Obama "legacy" will be dismantled in the next six months.  Big Danny Tarullo will probably, in an operational sense wind up sleeping with the fishes if he doesn't decide to slip out the back door into the loving arms of Crazy Lizzy who, believing she is Ms. Clinton's natural sucessor, will want no part of him (she needs money...Wall Street has money...Wall Street hates him).  Dodd/Frank will catch a good kicking but not entirely disappear which may not be a bad thing although how they are going to fix it is beyond my poor powers of comprehension.  Somebody had better start thinking about the BIS meetings at which risk accountability will be a primary topic and since the meetings start on January 9, all we have is a very lame duck bunch of bankers and regulators to carry the flag.  Not good.  There had better be quick thought and even quicker action on the part of the Trumpsters in getting a message Over There and finding the right people to do it.  Hint: Lael Brainard is not one of those people.  I can supply a few names if anyone is interested.  This could get ugly...more on that at a later time.  There is so much more.

But the really great thing to watch in the coming months will be the interplay between the Trumpsters and Chuck Schumer in the Senate.  Chuck replaces that most odious of creatures, Harry Reid, and while he will become the leader of the "loyal opposition," Chuck has always known on which side his bread is buttered and that is the side that reads "Wall Street."  He's a nasty piece of political work but he's in a tough spot.  Lizzy on his left, the Street (now) on his right, and his buddy The Donald in the White House..oh yes, they are good friends.  This could be better than "Hamilton."  The happiest guy around?  Why me of course!  I have material for at least...two years?

Have a great weekend!

WE'RE BAAAAACK!

Marvelous time wandering around the East Coast seeing family, friends and especially grandchildren. Woke up in northern Virginia on the morning of August 31 and the temperature was 52 degrees fahrenheit. 52! In August! I thought Al Gore had died. It was lovely.

Many, MANY years ago we were negotiating a particularly unpleasant piece of financing with a company whose CEO was on the board of my institution. Representing the other side was a high powered and high priced counsel from the firm of Pillsbury Madison & Sutro of San Francisco. The good guys put forward James Marshall Esq. of White & Case. Jimmy was a 6th generation lay-yer from Virginia; 6th removed that is from Chief Justice James Marshall of that court in D.C. From the git-go Jimmy had little time for the head hummer from Pillsbury and made his dislike clear. In the midst of an oration from said head-hummer, I had to leave to take a phone call which I announced shouldn't take more than 5 minutes. 45 minutes later I returned to an ice-cold room at what was, apparently, the exact moment of conclusion of the oration, apologizing at great length for my absence. "That's all right Charlie," said Jimmy, "in your absence, nothing of importance was discussed." Little was accomplished that day.

Jimmy is long gone but it seems that his observation would be appropriate today. In my absence, the ridiculous "cash for clunkers" program has ended, the health debate goes on, political change promised by The Leader is no where in sight and on the financial front nothing of importance has been discussed. Well, that may not be true as all of the financial head hummers from the G-20 are now winging their way home from the BIS in Basel where great matters of state were discussed.

I can remember clearly the Basel II accords which were designed to prevent a reoccurrence of the financial melt-down of the early eighties through new requirements for Tier I capital and alike. I expect we shall over the next few weeks hear more of the same coupled with the regulation of morality in the form of pay limits, bonus limits, gearling limits yada, yada, yada which of course in the long run will do no good whatsoever in the real world. Wonderful theater, however, but as this economy goes nowhere fast, unemployment advances inexorably towards 10% and a new election year just over three months away may well be overtaken by the reality of how The Leader and his congressional mob are going to hold their majorities in the face of a very European-like recovery. Which leads me to wonder why gold broke $1000 today in the face of no inflation and stable interest rates, the dollar tanked in the morning and oil spiked above $71? Who's afraid of what and where does one hide? And yet, the stock market marched on up 56 at the close and the general feeling is overseas economies are on their way up. Back to School sales seem to have been above expectations and credit card losses are declining. Maybe we are out of this thing. And maybe I should go visit the family some more. It's nice to be back, however.